Financing a Shareholder Buyout

[MTSUK1972]

Two Shareholders, 50% shareholding each, no Shareholders Agreement in place.

Shareholder A has offered to sell their 50% to Shareholder B for what looks to be a fair/reasonable price.

Shareholder B wants to purchase the shares, but doesn't have all the finance in place.

Can Shareholder B obtain a Business Loan to finance the buyout whilst still in partnership with Shareholder A? If so, would A also have to agree to it as the B/L would need to be signed off by the Business to allow the funds to be released and paid to A to allow the transfer of shares to take place to B?

[atticus]

The purchase price would have to be funded by B, so B would have to be the borrower, and not the company.

Alternatively, if finances permit, the company may be able to buy back A's shares. If this route is to be considered, professional advice MUST be taken. The Companies Act 2006 contains numerous bear traps.

[MTSUK1972]

Many Thanks (again) for your advice and assistance. This is precisely what i thought was the case - but B is being given some bad advice by a finance broker who is assuring them that they are fine to do this

[atticus]

Finance brokers know (in theory) about raising money through borrowing. I would not consult one for company law advice.